With the rally on Friday and continuing today, Chinese stocks are now at the highest level since Aug 20th. Optimism that their economic stimulus program is taking hold was highlighted in a weekend speech by Chinese Premier Wen. There is also talk of another stimulus plan in the works.

A key aspect of China’s signs of hope has been a resurgence in bank lending which is obviously being encouraged by authorities as opposed to lenders seeing a sudden slew of opportunities. Hopefully though it can sustain itself as it will not only provide hope for the region but also keep a bid under commodities, which is a boost to many natural resource dependent emerging markets.

Crude is lower though after the IEA on cut its ’09 demand estimate by 1mm barrels partially offset by a 300k cut in non OPEC supply. On the heels of the WFC news, GS, JPM and Citi report this week with talk that GS is set for a secondary to pay back TARP money. Kudos to them if they do.

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See also:
China Slows Purchases of U.S. and Other Bonds http://www.nytimes.com/2009/04/13/business/global/13yuan.html

Category: Commodities, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “China Driving the Growth Bus”

  1. Super-Anon says:

    We’ve almost got the financials pumped back into positive territory.

  2. Super-Anon says:

    BTW, some sobering graphs about China over on Setsers site:

    http://blogs.cfr.org/setser/2009/04/10/big-changes-but-not-much-adjustment-chinas-march-trade-data/#more-5150

    Personally I find it hard to get too excited about the China growth story when their primary businesses is exports and they’ve fallen off a cliff recently.

    Makes me think there’s some real denial here and some folks may be setting themselves up for a letdown later in the year.

  3. dead hobo says:

    PB noted (easily impressed)

    Chinese stocks are now at the highest level since Aug 20th.

    comment:
    ———————–
    Isn’t this the same penny stock market that regularly went up tens of percent every few weeks before he crash? Nobody took that market seriously before the crash. What’s so special about them now? It’s a junk stock market. New stories make the Chinese government look like they might be implementing a form of carry trade soon. Joy. Now the Chinese are a part of the pump and dump. Fortunately, the Chinese stock market only matters to uninformed pundits.

  4. VennData says:

    If you go to China, you’ll see with your own eyes that it’s much more than an export story. The numbers are hard to trust fully, but just go there. Amazing really.

  5. Super-Anon says:

    If you go to China, you’ll see with your own eyes that it’s much more than an export story. The numbers are hard to trust fully, but just go there. Amazing really.

    I’ve been astonished by the things I’ve seen on recent documentaries of China. But still, if a lot of what is going on there is indirectly related to exports it could still be big trouble.

    I keep hearing that China’s GDP is 40% exports and exports have fallen off 25%. It’s very difficult for me to see a postive year for China if those numbers are anywhere close to accurate.

  6. the chinese market is what the us market was in 1929. they are tracing out the large rally out of the fall crash that we failed to replicate. if this analog is accurate – their market will start cracking this month or next and give back the entire retracement plus another leg down.

    we are playing uk’s character in this model. if that’s the case – obama is playing churchill.

    on a side anecdote – i just got back from taking my family to disney for a week. they had to close magic kingdom twice because the attendance was too high. it was absolutely madness.

    speaking of madnesss – we ran across rod blogojevich in animal kingdom (no joke!). after he passed i got the crowd roaring by announcing, “Mr. Blogojevich you just got indicted on 15 counts – what will you be doing now?

    I’m going to Disney World!

    surreal.

  7. franklin411 says:

    Don’t the Chinese know that government spending can’t create growth?

  8. Super-Anon says:

    Don’t the Chinese know that government spending can’t create growth?

    China isn’t bankrupt like some other governments – China has legitimate savings they can spend.

  9. franklin411 says:

    @Super:
    That wasn’t the formulation of the anti-stimulus crowd. Their argument was that government can never create growth, regardless of the source of funds. Their argument was that private enterprise is the only force that can ever induce growth. China is showing us the fallacy of that argument.

  10. Marcus Aurelius says:

    Mish has an interesting article on recent GS chicanery. The money they’re paying back is probably ill-gotten from brazen manipulation of the market. According to Mish, they are the closest thing we have to a PPT. Their size, status, and position as a “bank holding company” make them large and powerful enough to bend the market any way the want. BR wants kudos for them. I want cainings.

    As for China, I have a friend who runs a factory there. According to him, what you see is not what you get. Plenty of glitz, glamour, and upscale-looking skyline and infrastructure, with an 11th century population that can afford none of it. If the Chinese can’t afford Chinese goods, they certainly cannot afford imported goods. Who will buy what China is selling, if not the Chinese themselves, and how will they buy it? Maybe they’ll resume financing the world’s consumerism.

  11. patfla says:

    Chinese growth was built upon two main pillars (sounds like a communist slogan): capital expenditure and exports. Of course in many ways the first fed into the second.

    To the extent that the capital expenditure was factories, I assume that’s gone and will stay gone for a while. Real estate – while being probably overbuilt – could pick up again – provided there are buyers (sort of like the US).

    To the extent that there’s now an infrastructural boost, that helps and of course, done properly, can be of long-term value (increasingly productivity). (one question: how much will get lost to graft in China?).

    A lot of the so-called optimism seems to be based on loan levels for the first 3 months (Q1) of this year. This needs to be carefully deconstructed. Michael Pettis does so: http://www.mpettis.com

    There was (again like the US – but different) an immense shadow banking system in China. One speculation is that for various reasons a lot of those shadow banking loans are coming back onto the books. In addition since the shadow banking system had grown so enormous if you add together the ‘open’ (maybe a euphemism in China) and shadow banking systems, the overall activity in loans could still be falling.

    And in addition (even more so than the US) these headlines are often at a huge disconnect with reality. The market (here) “wants” to believe something and so acts and flies in the face of reality (however it’s a psychological reality of its own). In China, you have the further distortion of the government working much harder and being more effective at putting its own spin on things. Not that Washington doesn’t try but I would claim that we still have a higher level of rule-of-law – and yes even transparency – than in China.

  12. harold hecuba says:

    CHina has massive overcapacity already. gov loans are probably going to buy stocks

  13. JohnnyVee says:

    Is GS paying the money it received from gov’t through AIG? Also, if GS thumbs its nose at the gov’r and pays back the TARP money, will GS be treated differently by gov’t. Meaning, will GS start to be the focus of gov’t probes and/or public scorn, etc.? I am not sure there is a good play for GS during these time. Just bad plays and very bad plays.

  14. sinomania says:

    Anyone who discounts the China growth story is a fool.
    Anyone who comments on China but has never been there is an even bigger fool.

    Say all you want about China being driven by exports only (not true), containing an “11th Century population” (true but existing side-by-side with a 21st Century population – China is always a town vs. country dynamic). What is happening in China is very real and very significant. It defies definition or explanation, let alone direct comparisons to our past and ways of doing things.

  15. orfeu says:

    There are many scary comments on this site. This one “Their argument was that private enterprise is the only force that can ever induce growth. China is showing us the fallacy of that argument.” is really idiotic.

    The other thing that scared me was the article about how great Bernake is. The comments were truly frightful.

    China will be starving in about an year or two, but go there and invest.

    I’m reading Barry’s articles since 2005, but I petty the man that invests in anything based on what is written on this site.

  16. patfla says:

    sinomania: 深怀疑,深智慧;小疑问,小智慧。

  17. patfla says:

    > Is GS paying the money it received from gov’t through AIG?

    No, it’s paying back its original TARP money. And thereby snipping the strings that came attached.

  18. Chuck Ponzi says:

    Patfla.

    Very true. I have been there, but I am deeply suspicious. Deeply.

    It would seem to me that I have heard at least 100 comparisons to today’s China. While many have some truth (at least in one aspect), they leave more questions than answers.

    China truly cannot continue at present course and speed.

  19. usphoenix says:

    China has been a force for centuries. Contrary to Conventional American history. Lloyd’s of London. Where exactly did Chang get all that gold when he ran off to Taiwan?

    Excuse me, but the real new China story is not about China. It’s about American companies invading,exploiting, manipulating, capitalizing. Corporate America is behind it. Motorola led the pack. Perfect. Cheap labor. Cheap production costs. Emerging country capable of a major boost in consumption.

    But it is also an incredibly fractured country. Wealth concentrated in urban hot spots. Rurals struggling to get a share of the wealth. Huge potential for major disruptions.